What To Do If You Inherit A Roth IRA
If you have inherited a Roth IRA and are not sure what to do next, here are some things to consider.
Most of the time your spouse will be your beneficiary. If you have inherited a Roth IRA from your spouse here are some of your options. You can choose to leave the money in the account and let the money continue to grow. You can take a lump sum payment on the account. You have the choice of taking annuitized distributions based on your life expectancy. As a spousal beneficiary, you also have the option of rolling the money over into your own Roth IRA account.
If you have inherited a Roth IRA, and it is not from your spouse, here are your options. You can leave the money in the account, you can take a lump sum distribution or you can take an annuitized distribution that is based on your life expectancy. A non spousal beneficiary does not have the option of rolling over the inherited Roth IRA into an account of their own.
Most people do not choose the cash out option when they inherit a Roth IRA, due to the fact that you will owe taxes on the money all at one time.
When you open a Roth IRA, you should always choose who you want as your beneficiary. Most married people choose their spouse as their beneficiary. Your beneficiary can be your children, grandchildren, nieces or nephews. If you want, your beneficiary does not even have to be related to you. It is your money, so you have the right to leave it to anybody you choose.